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Lehman Breaks $30 Support...

Is it headed to $20? How to Play it.

Written by Brian Hicks
Posted June 3, 2008

As we said the other day, our goal is to keep you up to date on hot options activity, and stock options to keep on radar.  We'll show you how to play them, too.

Today is no different. 

It's only a matter of time before Lehman (LEH) joins the latest list of casualties.

Having just broken multi-year support levels, the underlying stock could be headed to $20 near-term.  The best way to trade the possible drop is to buy the October 25 put option (LYHVE).  This is an aggressive trade. 

Concerns are mounting that the brokerage desperately needs to raise more capital.  But, according to The Guardian, "A source familiar with the situation said Lehman had no need to raise capital and would only do so if the right market opportunity presented itself, or if the firm thought it would help investor perceptions. The source said a move to raise capital was only one of "dozens" of options for the bank."

Didn't we hear a similar excuse from Bear Stearns days before the fall?

Could LEH stage the next Bear Stearns tumble?  It's just my opinion, but is it really out of the question?

Elsewhere, over the last few days, we've brought Masco (MAS) and Coca-Cola (CCE) to your attention, as plays on further downside.

Masco, since our report yesterday, broke $18 to the downside.  CCE is down about 53 cents after breaking $20 support levels.

Good Investing,

Ian L. Cooper

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